Fund Manager Commentary
Equity markets continued to surge higher
During August 2018, markets saw a recovery in the performance with both market indices and the broader market indices gaining on a month on month basis (MoM) on the back of an improving Q1FY19 earnings trend albeit off a low base and improving macro-economic trends. The market indices continued to outperform the broader market counterparts, a trend that was visible all through 2018. The mid and smallcap indices continue to see a mild bounce back considering the sharp correction these indices have witnessed on a CYTD basis. Market indices, BSE Sensex and NSE CNX Nifty were up 2.8% and 2.9% respectively while broader market indices, BSE Midcap and Smallcap indices gained 5.4% and 3.7% respectively.
Macro-economic indicators improved with Q1FY19 GDP (Gross Domestic Product) growth accelerated to 8.2% YoY from 7.7% last quarter with broad based recovery in manufacturing, agriculture and consumption. Other indicators were also positive with June Industrial production up 7.0% led by recovery with in manufacturing, mining and electricity. Infra, construction goods, and consumer durable continue to grow strongly. However, consumer non-durables’ slow growth was a disappointment. Composite PMI (Purchasing Managers’ Index) at 54.1 in July reached the highest level since demonetization aided by pick-up in services. July CPI (Consumer Price Index) reached 9-month low of 4.17% as core inflation moderated. July WPI (Wholesale Price Index) also eased to 5.09% on account of lower food prices. On the policy front, RBI (Reserve Bank of India) took a 25bps repo rate hike which was largely in line with expectations and kept neutral guidance going forward.
The April – June 2018 quarterly earnings trends are broadly on expected lines. The aggregate earnings delivery has been impacted by higher provisions at corporate focused banks and in select companies. The earnings momentum is expected to pick up through FY19.